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Bonds and Fixed Income

4 Reasons Why You Should Be Buying The Singapore Savings Bonds

 

DollarsAndSense looks at why you should definitely consider investing in the Singapore Savings Bonds.

1) Virtually risk free! Backed by the Government of Singapore

The Government of Singapore is guaranteeing both the capital and the interest accrued.

Singapore is one of the few AAA rated countries left in the world and with the Government’s backing, you will never need to worry about losing your hard earned money as compared to other investment products.

2) Cash on demand! There is no penalty for early redemption

If you were to sell a conventional bond in the market, interest fluctuations will dictate the price. When interest rate rises, one would expect to make some losses and vice versa.

However, the Singapore Savings Bond (SSB) allows us to redeem our monies within one month from the application, without any losses despite the direction of interest rates.

If you were to apply for redemption between the first business day and 4 business days before the end of the month, you will receive your monies + accrued interest on the second business day of the next month.

Exhibit 1: SSB monthly application and redemption timeline

 

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Source: Monetary Authority of Singapore

3) Low cost. You only need $500 to start investing.

As the SSB is meant for everyone in Singapore, the minimum amount

 

investible is set low, at $500, such that everyone can participate in this program. One is able to apply for up to $50,000 per bond issue with a total holding cap of $100,000.

4) Attractive interest rates that beat banks

The average yields on SGS Bonds since January 2014 to May 2015 are 2.3%, 1.5%, 0.7% and 0.5% for 10 year, 5 year, 2 year and 1 year respectively.

Therefore, you can expect to earn roughly an annual payout of about $2.30 for every $100 invested or a semi-annual payout of $1.15 for every $100 invested, for the 10 year SSB.

 

Comparing to the average bank savings deposit of 0.11% to 0.12% annually, the better choice would be to hold your monies in the SSB.

 

 

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